FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of September, 1998
RADICA GAMES LIMITED
(Translation of registrant's name into English)
Suite R, 6/F., 2-12 Au Pui Wan Street, Fo Tan, Hong Kong
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or 40-F
Form 20-F ___X___ Form 40-F ________
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes _______ No ___X____
If "yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82- _______________
Contents:
1. Quarterly Report for the Quarter Ended July 31, 1998
2. Press Release dated September 8, 1998
3. Press Release dated July 8, 1998
4. Press Release dated June 18, 1998
This Report on Form 6-K shall be deemed to be incorporated by reference
into the Registrant's Registration Statements on Form S-8 (No. 33-86960, No.
333-7000 and No. 333-59737) and on Form F-3 (No. 333-7526).
<PAGE>
QUARTERLY REPORT *
For the quarterly period ending July 31, 1998
Commission File Number 0-23696
RADICA GAMES LIMITED
(Exact name of registrant as specified in charter)
Bermuda N/A
(Country of Incorporation) (I.R.S. Employer Identification No.)
Suite R, 6/F., 2-12 Au Pui Wan Street, Fo Tan, Hong Kong
(Address of principal executive offices)
Registrant's telephone number, including area code: (852) 2693 2238
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes __x__ No ____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at July 31, 1998
- --------------------------------------- ----------------------------
Common Stock, par value $0.01 per share 20,039,194
- ------------------------
* As a foreign private issuer, the registrant is not required to file reports
on Form 10-Q. It intends to make voluntary quarterly reports to its stockholders
which generally follow the Form 10-Q format. Such reports, of which this is one,
are furnished to the Commission pursuant to Form 6-K.
2
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
RADICA GAMES LIMITED
FORM 6-K
The accompanying consolidated financial statements have been prepared
by the Company, without audit, and reflect all adjustments which are, in the
opinion of management, necessary for a fair statement of the results for the
interim periods. The statements have been prepared in accordance with the
regulations of the Securities and Exchange Commission (the "SEC"), but omit
certain information and footnote disclosures necessary to present the statements
in accordance with generally accepted accounting principles in the United States
of America.
These financial statements should be read in conjunction with the
financial statements, accounting policies and notes included in the Form 20F for
the year ended October 31, 1997 as filed with the Securities and Exchange
Commission. Management believes that the disclosures are adequate to make the
information presented herein not misleading.
3
<PAGE>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(US Dollars in thousands, NINE MONTHS ENDED THREE MONTHS ENDED
except per share data) JULY 31, JULY 31,
------------------------------ ------------------------------
1998 1997* 1998 1997*
------------- ------------- ------------- -------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Net sales $ 93,052 $ 47,375 $ 34,829 $ 22,532
Cost of sales
(40,913) (24,806) (15,348) (10,861)
------------- ------------- ------------- -------------
Gross profit 52,139 22,569 19,481 11,671
------------- ------------- ------------- -------------
OPERATING EXPENSES:
Selling, general and administrative expenses (17,948) (8,335) (6,559) (3,404)
Research and development (2,419) (1,292) (1,050) (361)
Acquired research & development (1,500) - - -
Depreciation and amortization (2,412) (1,843) (998) (1,052)
Total operating expenses (24,279) (11,470) (8,607) (4,817)
------------- ------------- ------------- -------------
OPERATING INCOME 27,860 11,099 10,874 6,854
OTHER INCOME 516 502 209 199
SHARE OF LOSS OF AFFILIATED COMPANY (168) (61) (76) (61)
NET INTEREST INCOME 1,527 531 577 248
------------- ------------- ------------- -------------
INCOME BEFORE INCOME TAXES 29,735 12,071 11,584 7,240
PROVISION FOR INCOME TAXES (Note 7) (496) (85) (400) (93)
------------- ------------- ------------- -------------
NET INCOME $ 29,239 $ 11,986 $ 11,184 $ 7,147
============= ============= ============= =============
EARNINGS PER SHARE - BASIC: (Note 9)
Net earnings per share $ 1.43 $ 0.58 $ 0.55 $ 0.34
============= ============= ============= =============
Average number of shares outstanding 20,518,553 20,732,615 20,463,416 20,786,091
============= ============= ============= =============
EARNINGS PER SHARE - ASSUMING DILUTION: (Note 9)
Net earnings per share and dilutive potential common stock $ 1.34 $ 0.56 $ 0.52 $ 0.33
============= ============= ============= =============
Average number of shares and dilutive potential
common stock outstanding 21,822,965 21,515,747 21,685,288 21,799,790
============= ============= ============= =============
<FN>
* Restated to conform with 1998 presentation.
</FN>
</TABLE>
See accompanying notes to the consolidated financial statements.
4
<PAGE>
RADICA GAMES LIMITED
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JULY 31, OCT. 31,
-------------- --------------
(US Dollars in thousands, except share data) 1998 1997
-------------- --------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 36,602 $ 33,504
Short-term investments - 2,050
Accounts receivable, net of allowances for doubtful
accounts of $900 in 1998 and $908 in 1997 and estimated
customer returns of $1,599 in 1998 and $2,327 in 1997 17,063 18,740
Inventories, net of provision of $1,314 in 1998 and
$3,479 in 1997 (Note 3) 23,962 11,741
Prepaid expenses and other current assets 1,058 681
-------------- --------------
TOTAL CURRENT ASSETS 78,685 66,716
-------------- --------------
INVESTMENT IN AFFILIATED COMPANY (Note 4) 989 194
-------------- --------------
PROPERTY, PLANT AND EQUIPMENT, NET (Note 5) 15,441 12,539
-------------- --------------
INTANGIBLE ASSETS, NET (Note 6) 3,500 -
-------------- --------------
TOTAL ASSETS $ 98,615 $ 79,449
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable 11,494 8,209
Accrued payroll and employee benefits 2,407 1,249
Commissions payable 676 915
Accrued sales expenses 2,242 1,254
Accrued warranty expenses 2,161 2,161
Accrued other expenses 5,828 3,776
Income taxes payable 182 213
Deferred income taxes (Note 7) 79 79
-------------- --------------
TOTAL CURRENT LIABILITIES 25,069 17,856
-------------- --------------
SHAREHOLDERS' EQUITY:
Common stock
par value $0.01 each, 100,000,000 shares authorized,
20,039,194 shares outstanding (20,860,200 at Oct. 31, 1997) (Note 8) 200 209
Additional paid-in capital 17,658 28,589
Retained earnings 55,722 32,800
Cumulative translation adjustment (34) (5)
-------------- --------------
TOTAL SHAREHOLDERS' EQUITY 73,546 61,593
-------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 98,615 $ 79,449
============== ==============
</TABLE>
See accompanying notes to the consolidated financial statements.
5
<PAGE>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(US Dollars in thousands) Nine months ended July 31,
------------------------------
1998 1997*
------------- -------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flow from operating activities:
Net income $ 29,239 $ 11,986
Adjustments to reconcile net income to net cash
provided by operating activities:
Deferred income taxes - 177
Depreciation 1,412 1,178
Amortization 1,000 665
Share of loss of affiliated company 168 61
Loss on disposal and write off of property, plant and equipment 5 (11)
Cumulative translation adjustment (29) (16)
Changes in assets and liabilities:
Accounts receivable 1,677 723
Inventories (12,221) (163)
Prepaid expenses and other current assets (377) (35)
Accounts payable 3,285 3,136
Accrued payroll and employee benefits 1,158 (538)
Commissions payable (239) (174)
Accrued sales expenses 988 262
Accrued other expenses 2,052 187
Income taxes payable (31) 5
------------- -------------
Net cash provided by operating activities $ 28,087 $ 17,443
------------- -------------
Cash flow from investing activities:
Decrease (increase) in short-term investments 2,050 (2,011)
Proceeds from sale of property, plant and equipment 31 20
Purchase of property, plant and equipment (4,350) (859)
Investment in an affiliate company (963) (1,000)
Purchase of intangible assets (900) -
------------- -------------
Net cash used in investing activities $ (4,132) $ (3,850)
------------- -------------
Cash flow from financing activities:
Funds from stock options exercised 910 178
Repurchase of common stock (21,767) -
Repayment of long-term debt - (97)
------------- -------------
Net cash used in by financing activities $ (20,857) $ 81
------------- -------------
Net increase in cash and cash equivalents $ 3,098 $ 13,674
Cash and cash equivalents:
Beginning of period $ 33,504 $ 8,527
------------- -------------
End of period $ 36,602 $ 22,201
============= =============
Supplementary disclosures of cash flow information: Cash paid during the period
for:
Interest $ 61 $ 11
Income taxes 526 80
<FN>
* Restated to conform with 1998 presentation.
</FN>
</TABLE>
See accompanying notes to the consolidated financial statements.
6
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US dollars in thousands)
1. ORGANIZATION AND BASIS OF FINANCIAL STATEMENTS
The consolidated financial statements include the accounts of the Company
and all subsidiaries. Investments in affiliates, owned more than 20 percent
but not in excess of 50 percent, are recorded using the equity method. All
significant intra-group transactions and balances have been eliminated on
consolidation.
The Company designs, develops, manufactures and distributes a variety of
electronic handheld and mechanical games.
The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America
and are presented in US dollars as the Company's sales are predominantly
denominated in US dollars.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents - Cash and cash equivalents include cash on hand,
cash accounts, interest-bearing savings accounts, and time certificates of
deposit with a maturity at purchase date of three months or less.
Inventories - Inventories are stated at the lower of cost, determined by
the weighted average method, or market. Provision for potentially obsolete
or slow-moving inventory is made based on management's analysis of
inventory levels and future expected sales.
Depreciation and amortization of property, plant and equipment -
Depreciation is provided on the straight line method at rates based upon
the estimated useful lives of the property, generally not more than seven
years except for leasehold land and buildings which are 30 years, the term
of the lease. Costs of leasehold improvements and leased assets are
amortized over the life of the related asset or the term of the lease,
whichever is shorter. Upon sale or retirement, the costs and related
accumulated depreciation or amortization are eliminated from the respective
accounts and any resulting gain or loss is included in income. No
depreciation is provided in respect of construction in progress.
Intangible assets - Intangible assets primarily represent the excess of the
purchase price of acquisition of a business over the fair value of the net
assets acquired. Intangible assets also represent cost allocated to brand
names. Such assets are amortized on a straight-line basis over the period
estimated to be benefited, but not to exceed 40 years. The carrying value
of intangible assets is periodically reviewed by the Company and
impairments are recognized when there is a permanent diminution in value.
The Company policy is to charge a full year of amortization in the year of
acquisition.
Mold costs - The Company expenses all mold costs in the year of purchase or
for internally produced molds, in the year of construction.
7
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(US dollars in thousands)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue recognition - Revenues are recognized as sales when merchandise is
shipped. The Company permits the return of damaged or defective products
and accepts limited amounts of product returns in certain other instances.
Accordingly, the Company provides allowances for the estimated amounts of
these returns at the time of revenue recognition, based on historical
experience adjusted for known trends.
Investments -- Debt and equity securities which the Company has both the
positive intent and ability to hold to maturity are classified as
held-to-maturity and carried at amortized cost. Debt and equity securities
which might be sold prior to maturity are classified as available-for-sale
and carried at approximate fair value. Any material unrealized gains and
losses related to available-for-sale investments, net of applicable taxes,
are reported in other comprehensive income. The Company determines the
appropriate classification of securities at the time of purchase and
evaluates such classification as of each balance sheet date.
Income taxes - Income taxes are provided based on an asset and liability
approach for financial accounting and reporting of income taxes. Deferred
income tax liabilities or benefits are recorded to reflect the tax
consequences in future years of differences between the tax basis of assets
and liabilities and the financial reporting amounts at each year end. A
valuation allowance is recognized if it is more likely than not that some
portion of, or all of, a deferred tax asset will not be realized.
Foreign currency translation - Assets and liabilities of foreign operations
are translated using period-end exchange rates. Revenues and expenses of
foreign operations are translated using average monthly exchange rates. The
impact of exchange rate changes is shown as "Cumulative Translation
Adjustment" in shareholders' equity. Net losses from foreign exchange
transactions of $203 and $68 in the quarters ended July 31, 1998 and 1997
respectively, are included in selling, general and administrative expenses.
Post-retirement and post-employment benefits - The Company does not provide
post-retirement benefits other than pensions to employees and
post-employment benefits are immaterial.
Warranty - Future warranty costs are provided for at the time of revenue
recognition based on management's estimate by reference to historical
experience adjusted for known trends.
Stock options - The Company continues to follow Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees", in accounting
for its stock options. As a result, no compensation expense has been
recognized as the exercise price of the Company's employee stock options
equals the market price of the underlying stock at the date of grant. Pro
forma disclosures of the effect on net income (loss) and earnings (loss)
per share as if the Company had accounted for its employee stock options
under the fair value method prescribed by Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation", are
shown in note 10.
8
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(US dollars in thousands)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings (loss) per share - Earnings (loss) per share is based on the
weighted average number of shares of common stock and dilutive potential
common stock outstanding. Dilutive potential common stock results from
dilutive stock options. The effect of such dilutive potential common stock
on net income (loss) per share is computed using the treasury stock method.
Use of estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires the use of
estimates. Actual results could differ from those estimates.
Comprehensive income and segment information - Regarding the reporting of
comprehensive income prescribed by SFAS No. 130, since the Company did not
have any material items of other comprehensive income in the period ended
July 31, 1998 and 1997, the net income reported in the consolidated
statements of operation is equivalent to the total comprehensive income.
Further, as the Company has only one operating segment, the adoption of
SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information", did not result in any restatement of comparative information.
Reclassifications - Certain reclassifications have been made to prior
periods amounts to conform with the 1998 presentation.
3. INVENTORIES
Inventories by major categories are summarized as follows:
July 31, October 31,
1998 1997
---------------- -----------------
(unaudited)
Raw materials $ 6,056 $ 2,786
Work in progress 7,395 2,889
Finished goods 10,511 6,066
---------------- -----------------
$ 23,962 $ 11,741
================ =================
4. INVESTMENT IN AFFILIATED COMPANY
In May 1997, the Company acquired 123,000 shares of the capital stock of
U-Tel, Inc., a private company incorporated in Nevada, United States of
America, which is engaged in research and development of telecommunication
equipment, for $1,000 in cash. This investment represents a 34.6% interest.
U-Tel, Inc. is in the early stages of its product development cycle and
accordingly the excess purchase price over fair value of the net assets
acquired of $665, was charged to operations for the year ended October 31,
1997.
9
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(US dollars in thousands)
4. INVESTMENT IN AFFILIATED COMPANY (Continued)
In July 1998, following a refinancing of U-Tel, Inc., the Company purchased
a further 56,647 shares for $963 in cash. This allowed the Company to
maintain its percentage holding in U-Tel, Inc.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
July 31, October 31,
1998 1997
--------------- ---------------
(unaudited)
<S> <C> <C>
Land and buildings $ 9,864 $ 9,882
Plant and machinery 5,236 3,633
Furniture and equipment 3,803 3,184
Leasehold improvements 1,402 1,318
Construction-in-progress 1,964 -
--------------- ---------------
Total $ 22,269 $ 18,017
Less: Accumulated depreciation and
amortization (6,828) (5,478)
--------------- ---------------
Total $ 15,441 $ 12,539
=============== ===============
</TABLE>
No amortization of capital lease assets was included in depreciation and
amortization expenses in the accompanying statements of operations, for the
period ended July 31, 1998. For the period ended July 31, 1997, such
amortization of capital lease assets amounted to $6.
6. INTANGIBLE ASSETS
The intangible asset of $3,500 on the balance sheet at July 31, 1998
represents a portion of the acquisition price allocated to brand name and
goodwill with regards the assets and business of KidActive, LLC, dba Girl
Tech(TM) acquired during the quarter ended April 30, 1998. It is
management's opinion that the amounts capitalized of $4,500 represent the
fair value assigned to the intangible assets acquired. This cost is being
amortized over a three year fiscal period on a straight line basis.
Accumulated amortization was $1,000 at July 31, 1998.
10
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(US dollars in thousands)
6. INTANGIBLE ASSETS (Continued)
Intangible assets are as follows:
July 31,
1998
---------------
(unaudited)
At cost:
Brand name $ 1,000
Goodwill 3,500
---------------
Total 4,500
Less: Accumulated amortization (1,000)
---------------
Total $ 3,500
===============
7. INCOME TAXES
The components of income from continuing operations before income taxes are
as follows:
Nine months ended July 31,
------------------------------
1998 1997
------------ -----------
(unaudited) unaudited)
United States $ 9,004 $ (253)
Foreign subsidiaries operating in:
People's Republic of China 20,648 12,218
Hong Kong 83 106
------------ -----------
$ 29,735 $ 12,071
============ ===========
As the Company's subsidiary in the People's Republic of China ("PRC") is a
sino-foreign joint venture enterprise, it is eligible for an exemption from
income tax for two years starting from the first profitable year of
operations and thereafter a 50 percent relief from income tax for the
following three years under the Income Tax Law of the PRC. That subsidiary
had its first profitable year of operations in the year ended December 31,
1997. In addition, under the existing processing arrangement and in
accordance with the current tax regulations in the PRC, manufacturing
income generated in the PRC is not subject to PRC income taxes.
11
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(US dollars in thousands)
7. INCOME TAXES (Continued)
The (provision) credit for income taxes consists of the following:
Nine months ended July 31,
---------------------------------
1998 1997
-------------- -------------
(unaudited) (unaudited)
Hong Kong
Current income tax $ (16) $ (88)
Deferred - -
-------------- -------------
$ (16) $ (88)
United States
State tax (expense) benefit, net of
federal tax (expense) benefit $ (480) $ 3
Deferred - -
-------------- -------------
$ (480) $ 3
-------------- -------------
$ (496) $ (85)
============== =============
A reconciliation between the (provision) credit for income taxes computed
by applying the statutory tax rates in the United States for 1998 and 1997
to income before income taxes and the actual (provision) credit for income
taxes is as follows:
Nine months ended July 31,
------------------------------
1998 1997
------------ ------------
(unaudited) (unaudited)
US statutory rate 34% 34%
------------ ------------
Provision for income taxes at
statutory rate on income for the period $ (10,110) $ (4,104)
State income taxes (70) 9
International rate differences 7,874 4,118
Accounting (losses) gains for which deferred
income tax cannot be recognized (841) (31)
Decrease in valuation allowance 2,591 (59)
Other 60 (18)
------------ ------------
Income tax (provision) credit $ (496) $ (85)
============ ============
12
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(US dollars in thousands, except share and per share data)
7. INCOME TAXES (Continued)
Deferred income taxes reflect the net tax effect of temporary differences
between the amounts of assets and liabilities for income tax purposes
compared with the respective amounts for financial statement purposes. At
July 31, 1998 and October 31, 1997 deferred income taxes comprised:
July 31, October 31,
1998 1997
------------- ------------
(unaudited)
Deferred tax (liabilities) assets:
Excess of tax over financial
reporting depreciation $ (79) $ (79)
Tax losses - 1,173
Bad debt allowance 306 309
Advertising allowances 307 244
Inventory obsolescence reserve 277 643
Accrued sales adjustments and returns 837 1,321
Other 88 716
------------- ------------
1,736 4,327
Valuation allowance (1,815) (4,406)
------------- ------------
$ (79) $ (79)
============= ============
8. COMMON STOCK
On December 22, 1997, the Board adopted a plan authorizing the Company to
repurchase up to one million shares of its common stock. On June 16, 1998,
the Board adopted a further plan authorizing the Company to repurchase up
to one million additional shares of its common stock.
During the quarter ended July 31, 1998, the Company repurchased 544,100
shares at an average price of $16.79 per share under these programs. In
total 1,404,500 shares have been repurchased in the nine month period
ending July 31, 1998 at an average price of 15.46 per share. All
repurchased shares were cancelled.
13
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(US dollars in thousands, except share and per share data)
9. EARNINGS PER SHARE
The following information shows the numbers used in computing earnings per
share and the effect on income and the weighted average number of shares of
dilutive potential common stock:
<TABLE>
<CAPTION>
Nine months ended July 31, 1998
-----------------------------------------------------
Earnings
Numerator Denominator per share
--------------- --------------- ---------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Basic earnings per share:
Net income $ 29,239 20,518,553 $ 1.43
===============
Effective of dilutive options - 1,304,412
--------------- ---------------
Diluted earnings per share:
Net income, assuming $ 29,239 21,822,965 $ 1.34
=============== =============== ===============
all dilutive options exercised
Options on 161,000 shares of common stock were not included in computing
diluted earnings per share since their effects were antidilutive.
<CAPTION>
Three months ended July 31, 1998
-----------------------------------------------------
Earnings
Numerator Denominator per share
--------------- --------------- ---------------
unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Basic earnings per share:
Net income $ 11,184 20,463,416 $ 0.55
==============
Effective of dilutive options - 1,221,872
--------------- --------------
Diluted earnings per share:
Net income, assuming $ 11,184 21,685,288 $ 0.52
=============== =============== ===============
all dilutive options exercised
</TABLE>
Options on 90,000 shares of common stock were not included in computing
diluted earnings per share since their effects were antidilutive.
14
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(US dollars in thousands, except per share data)
10. STOCK OPTIONS
The Company's 1994 Stock Option Plan (the "Stock Option Plan") provided for
options to be granted for the purchase of an aggregate of 1,600,000 shares
of common stock at per share prices not less than 100% of the fair market
value at the date of grant as determined by the Compensation Committee of
the Board of Directors. Following approval at the annual shareholders
meetings in April 1997 and 1998, the Stock Option Plan's aggregated number
of common stock increased by 400,000 and 800,000 respectively. As a whole,
the Stock Option Plan's aggregate number of common stock increased to
2,800,000 shares available for options. Options under this plan are
generally exercisable ratably over five years from the date of grant unless
otherwise provided.
In January 1996, due to the reduced market price of Radica Games common
stock, the Company offered active employees holding outstanding options the
opportunity to exchange them for stock options at an exercise price equal
to the fair market value at that time. As a result of the offer, holders of
916,000 options at an exercise price of $8.50 returned their options for
cancellation and 916,000 options at an exercise price of $1.375 were
granted in exchange.
In January 1997, 60,000 stock options held by outside directors at an
exercise price of $11.00 per share were repriced to $1.72 per share, the
market price on January 3, 1997. Upon each re-election to the Board of
Directors in 1995 and 1996, each outside director received non-qualified
stock options to purchase 5,000 shares of Common Stock of the Company at
$3.66 per share and $1.50 per share, respectively (the closing market price
on those dates). Upon re-election to the Board of Directors in 1997 and
thereafter, each outside director received or will receive non-qualified
stock options to purchase 15,000 shares of Common Stock of the Company at
an exercise price equal to the closing market price on such date.
15
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(US dollars in thousands, except per share data)
10. STOCK OPTIONS (Continued)
Option activity for the period ended July 31, 1998:-
Weighted average
Number exercise price
of shares per share
----------- ----------------
(in thousands) $
Outstanding at October 31, 1997 1,756 2.31
Options granted 291 16.84
Options cancelled (43) 14.63
Options exercised (393) 2.31
-----------
Outstanding at July 31, 1998 1,611 4.61
===========
Exercisable at July 31, 1998 483 3.12
The following is additional information relating to options outstanding as
of July 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options exercisable
------------------------------------------------------------ ------------------------------
Weighted average
Weighted average remaining Weighted average
Exercise Number exercise price contractual Number exercise price
price range of shares per share life (years) of shares per share
----------- --------- --------- ----------- --------- ---------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C>
$0.567 to 2.000 863 $ 1.33 7.65 115 $ 1.46
$2.001 to 4.000 421 3.48 8.74 357 3.55
$4.001 to 6.000 8 5.00 8.88 - -
$6.001 to 8.000 58 6.78 9.01 11 6.64
$8.001 to 10.000 5 8.60 9.00 - -
$10.001 to 12.000 - - - - -
$12.001 to 14.000 45 12.87 9.42 - -
$14.001 to 16.000 25 15.56 9.32 - -
$16.001 to 18.000 96 17.25 9.64 - -
$18.001 to 20.000 90 19.03 9.73 - -
--------- ---------
1,611 $ 4.61 8.30 483 $ 3.12
========= =========
</TABLE>
16
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(US dollars in thousands, except per share data)
10. STOCK OPTIONS (Continued)
Pro forma information regarding net income (loss) and earnings (loss) per
share is required by SFAS No. 123, and has been determined as if the
Company had accounted for its employee stock options under the fair value
method of SFAS No. 123. The weighted average fair value of stock options at
date of grant of $8.71 and $1.54 per option for the period ended July 31,
1998 and 1997, respectively, were estimated using the Black-Scholes option
pricing model with the following weighted average assumptions:
Nine months ended July 31,
-------------------------------
1998 1997
--------------- --------------
(unaudited) (unaudited)
Expected life of options 5 years 5 years
Risk-free interest rate 6.50% 6.50%
Expected volatility of underlying stock 50% 50%
Dividends 0% 0%
The Black-Scholes option pricing models require the input of highly
subjective assumptions, including the expected volatility of stock price.
Because changes in subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing model does not
necessarily provide a reliable single measure of the fair value of the
stock options.
If the Company had accounted for its stock option plans by recording
compensation expenses based on the fair value at grant date for such awards
consistent with the method of SFAS No. 123, the Company's net income (loss)
earnings (loss) per share would have been reduced to the pro forma amounts
as follows:
Nine months ended July 31,
----------------------------------
1998 1997
--------------- ---------------
(unaudited) (unaudited)
Pro forma net income $ 28,702 $ 11,695
Pro forma earnings per share 1.40 0.56
17
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(US dollars in thousands)
11. CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS
Accounts receivable of the Company are subject to a concentration of credit
risk with customers in the retail sector. This risk is limited due to the
large number of customers composing the Company's customer base and their
geographic dispersion, though the Company has two customers which accounted
for more than thirty percent and fifteen percent of net sales in the period
ended July 31, 1998 and three customers which accounted for more than
twenty percent, eighteen percent and ten percent of net sales in fiscal
1997. The Company performs ongoing credit evaluations of its customers'
financial condition and, generally, requires no collateral from its
customers.
12. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments." The estimated fair
value amounts have been determined by the Company, using available market
information and appropriate valuation methodologies. The estimates
presented herein are not necessarily indicative of the amounts that the
Company could realize in a current market exchange.
The carrying amounts of cash and short-term investments, accounts
receivable and accounts payable are reasonable estimates of their fair
value.
13. COMMITMENTS AND CONTINGENCIES
The Company leases certain warehouses and equipment under operating leases.
Total expense for the operating leases was $269 and $273 for the quarters
ended July 31, 1998 and 1997, respectively.
At July 31, 1998, the Company was obligated under operating leases
requiring future minimum lease payments as follows:
Operating leases
----------------
1998 $ 71
1999 201
2000 188
2001 56
2002 30
----------------
Total minimum lease payments $ 546
================
At July 31, 1998, certain leasehold land and buildings with a net book
value of $4,913 and bank balances of $3,871 were pledged to secure general
banking facilities including overdraft and trade facilities granted to the
Company.
18
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(US dollars in thousands)
14. RETIREMENT PLAN
The Company has defined contribution retirement plans covering
substantially all employees in Hong Kong. Under these plans, eligible
employees may contribute amounts through payroll deductions which are 5% or
more of individual salary, supplemented by employer contributions ranging
from 5% to 10% of individual salary depending on the years of service. The
expenses related to these plans were $84 and $71 for the nine months ended
July 31, 1998 and 1997, respectively.
15. LITIGATION
Ten purported class actions filed in various United States District Courts
against the Company, various of its officers and directors, and the
managing underwriters of the Company's initial public offering were
consolidated in the United States District Court for the District of Nevada
under the caption In re Radica Games Limited Securities Litigation, Master
File No. CV-S-94-00653-DAE (LRL). Plaintiffs filed a consolidated complaint
on November 4, 1994 that superseded all the complaints in the individual
actions.
The named plaintiffs originally sought to represent a class consisting of
purchasers of the Company's common stock in the initial public offering or
in the open market from May 13 through July 22, 1994 and sought
unquantified monetary damages and other relief against the defendants for
alleged violations of Sections 11, 12(2), and 15 of the Securities Act of
1933, Sections 10b (and Rule 10b-5 thereunder), 20(a), and 20A(a) of the
Securities Exchange Act of 1934, Sections 90.570, 90.660 and 90.660.4 of
the Nevada Revised Statutes, and the common law of Nevada relating to the
Company's registration statement and other public disclosures. As a
consequence of an Order of the Court granting in part defendants' motion to
dismiss the complaint and a stipulation of the parties, all of plaintiffs'
claims other than those arising under the Securities Act of 1993, and
limited to certain specified statements in the Company's registration
statement, were dismissed without prejudice. Pursuant to a stipulation of
the parties, the Court provisionally agreed to treat the remaining claims
as class claims.
After the close of discovery, plaintiffs moved for leave to amend their
complaint to add allegations with respect to an additional claimed omission
in the registration statement. Shortly thereafter, the Company moved for
summary judgment seeking dismissal of the complaint. Following a hearing on
July 31, 1996, the District Court entered an Order (i) denying plaintiffs'
motion to amend the complaint and (ii) granting the Company's (and the
other defendants') motion for summary judgment, and on August 9, 1996 the
District Court entered a judgment dismissing the action. Plaintiffs
subsequently moved for reconsideration of the grant of summary judgment
against them, and the court denied their motion.
Plaintiffs filed a timely appeal to the United States Court of Appeals for
the Ninth Circuit, and oral argument of such appeal was held on November 5,
1997. On November 14, 1997, the Court of Appeals entered an Order affirming
the judgment of the District Court. Plaintiffs sought no further review and
such judgment is now final.
19
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(US dollars in thousands)
16. SEGMENT INFORMATION
The Company operates in one principal industry segment: the design,
development, manufacture and distribution of a variety of electronic and
mechanical handheld and tabletop games. Geographic financial information is
as follows:
Nine months ended July 31,
------------------------------------------
1998 1997
------------------- ------------------
(unaudited) (unaudited)
Net sales:
United States $ 72,105 $ 31,317
PRC and Hong Kong 19,186 15,123
Other 1,761 935
------------------- ------------------
$ 93,052 $ 47,375
=================== ==================
Operating income (loss):
United States $ 8,724 $ (280)
PRC and Hong Kong 19,023 11,400
Other 113 (21)
------------------- ------------------
$ 27,860 $ 11,099
=================== ==================
Identifiable assets:
United States $ 24,906 $ 10,877
PRC and Hong Kong 72,617 46,013
Other 1,092 912
------------------- ------------------
$ 98,615 $ 57,802
=================== ==================
A significant portion of PRC and Hong Kong net sales were export sales to
the United States.
20
<PAGE>
RADICA GAMES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(US dollars in thousands)
17. VALUATION AND QUALIFYING ACCOUNTS
Nine months ended July 31,
-----------------------------------
1998 1997
---------------- ---------------
(unaudited) unaudited)
Beginning of period:
Allowances for doubtful accounts $ 908 $ 234
Estimated customer returns 2,327 817
Provision for inventories 3,479 8,419
--------------- --------------
$ 6,714 $ 9,470
=============== ==============
Charged to cost and expenses:
Allowances for doubtful accounts $ 200 $ 597
Estimated customer returns 456 386
Provision for inventories - -
--------------- --------------
$ 656 $ 983
=============== ==============
Release of provision:
Allowances for doubtful accounts $ (208) $ (144)
Estimated customer returns (1,184) (485)
Provision for inventories (2,165) (2,993)
--------------- --------------
$ (3,557) $ (3,622)
=============== ==============
End of period:
Allowances for doubtful accounts $ 900 $ 687
Estimated customer returns 1,599 718
Provision for inventories 1,314 5,426
--------------- --------------
$ 3,813 $ 6,831
=============== ==============
21
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
- ----------------------------------------------------------
The following discussion should be read in conjunction with the
attached financial statements and notes thereto, and with the audited financial
statements, accounting policies and notes included in the Company's Annual
Report on Form 20-F for the fiscal year ended October 31, 1997 as filed with the
United States Securities and Exchange Commission.
RESULTS OF OPERATIONS -- QUARTER ENDED JULY 31, 1998
COMPARED TO THE QUARTER ENDED JULY 31, 1997
Net revenues for the third quarter of fiscal 1998 were $34.83 million,
increasing 54.6% from $22.53 million for the same quarter last year. The Company
sold approximately 4 million units in the third quarter of fiscal 1998, an
increase of approximately 33% from the third quarter of fiscal 1997. The third
quarter increase in net sales was the result of continued strong sales of 1997
product together with the impact of 1998 products such as Lunker Bass(TM),
Junior Bass Fishin'(TM), NASCAR Racer(TM) and Trail Burner(TM) released in
earlier quarters and third quarter shipments of the new VMS(TM) game Stealth
Assault(TM) which started shipping at the end of July, together with Pro World
Class Golf(TM), the upgraded golf game, Monte Carlo Enduro Racer(TM) and Monte
Carlo NASCAR Racer(TM). In addition, sales to the Hasbro Games Group have grown
by 47% from $4.5 million in the third quarter of fiscal 1997 to $6.6 million in
the third quarter of fiscal 1998. New product shipped for the Hasbro Group
during the third quarter included Pro Drag Racer(TM) and Small Soldiers(TM). The
Company has started to ship Monopoly(TM) to Hasbro in early September. Several
new products are currently being developed for Hasbro for 1999 including four
Star Wars games; however, the nature of its contractual relationship with Hasbro
does not provide any guarantees as to future business potential or the
continuation of the relationship.
<TABLE>
<CAPTION>
Net Sales by Category (%)
-------------------------------------------- -------------------------------------------
1998 1997
-------------------------------------------- -------------------------------------------
Nine months to Nine months to
Q1 Q2 Q3 July 31, 1998 Q1 Q2 Q3 July 31, 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Category
Fishing games 54.7% 56.6% 43.4% 51.1% 19.0% 27.5% 42.4% 32.4%
Combat games 6.1% 2.0% 4.4% 4.0% 0.0% 0.0% 3.3% 1.6%
Sports games 5.4% 9.0% 10.4% 8.5% 14.9% 12.4% 8.3% 11.1%
Casino games 14.1% 8.0% 8.2% 9.9% 33.9% 23.9% 12.8% 21.2%
Heritage games 7.8% 6.2% 8.1% 7.3% 13.6% 11.1% 12.8% 12.6%
Extreme games 0.0% 4.3% 5.9% 3.7% 0.0% 0.0% 0.0% 0.0%
ODM products 11.9% 13.9% 19.6% 15.5% 18.6% 25.1% 20.4% 21.1%
(including those sold under
Monte Carlo trade name)
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Regional Split of Net Sales (%)
---------------------------- ----------------------------
1998 1997
---------------------------- ----------------------------
Nine months to July 31, 1998 Nine months to July 31, 1997
July 31, 1998 July 31, 1997
<S> <C> <C>
USA Customers 77.1% 65.2%
Non-USA Customers 7.4% 13.7%
ODM Customers 15.5% 21.1%
</TABLE>
The gross profit for the third quarter of fiscal 1998 increased by
$7.81 million to $19.48 million from $11.67 million in the third quarter of 1997
and the gross margin for the third quarter increased to 55.9% from 51.8% for the
same quarter last year. The increase in gross margin was due to higher sales
volume of current and new product at historic margin levels relative to sales of
low margin promotional product and Original Design Manufacturing ("ODM") sales,
as ODM decreased as a percentage of sales from 20.4% to 19.6%.
During the quarter the Company purchased an additional 56,647 shares in
U-Tel Inc. at a price of $17 per share. This maintained the Company's 35%
holding in U-Tel as U-Tel had issued new shares to several parties as part of a
second round of financing.
Operating expenses increased 78.6% to $8.61 million in the third
quarter of fiscal 1998 from $4.82 million in the same quarter of fiscal 1997,
due to increased sales related costs (particularly for national advertising),
increased research and development, offset by a $0.6 million provision against
the investment of U-Tel in the third quarter of 1997, an increase of $0.5
million as a result of amortization of intangible assets with regards Girl
Tech(TM) and increased salaries due to certain management additions. As a
percentage of sales, operating expenses increased from 21.4% in the third
quarter of fiscal 1997 to 24.7% in the third quarter of fiscal 1998. Commissions
for the third quarter of fiscal 1998 increased 85.8% to $1 million due to
increased sales; indirect salaries and wages increased 33.7% to $1.5 million due
to additions throughout the Company; advertising and promotion expenses
increased to $2.1 million from $0.13 million primarily as a result of accrued
expenditure for television advertising in the USA; and research and development
expenses increased 191% to $1.05 million due to increases in staff, recruitment
fees and external design costs.
Operating income for the third quarter of fiscal 1998 increased by
$4.02 million to $10.87 million from $6.85 million for the same quarter last
year.
The operating margin rose to 31.2% during the third quarter compared to
30.4% during the same quarter last year.
Net profit for the third quarter ended July 31, 1998 was $11.18 million
or $0.55 per share versus $7.15 million or $0.34 per share for the third quarter
of 1997, a 56.4% increase in profits.
23
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
- -------------------------------
Cash and cash equivalents totaled $36.6 million at July 31, 1998, up
$3.1 million from fiscal year ended October 31, 1997. Working capital at July
31, 1998 was $53.62 million, a $4.76 million increase from working capital of
$48.86 million at October 31, 1997. The ratio of current assets to current
liabilities decreased to 3.1 at July 31, 1998 from 3.7 at October 31, 1997. This
decrease in the current ratio is as a result of accrued expenses payable after
the end of the quarter.
There were no short-term borrowings at July 31, 1998 or at October 31,
1997.
During the quarter the Company repurchased 544,100 shares at an average
price of $16.79.
The Company believes that its existing cash and cash equivalents and
cash generated from operations are sufficient to satisfy its current anticipated
working capital needs.
The foregoing discussion contains forward-looking statements
that involve risks and uncertainties that could cause actual
results to differ materially from projected results as a
result of various factors including those set forth in the
Company's Annual Report on Form 20-F for the fiscal year ended
October 31, 1997, as filed with the Securities and Exchange
Commission. In particular, see "Item 1. Description of
Business - Risk Factors" in such Report on Form 20-F.
Item 3. Qualitative and Quantitative Disclosures About Market Risk
- ------------------------------------------------------------------
Not applicable.
24
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
- -------------------------
See Note 15 to the accompanying financial statements.
Item 2. Changes in Securities and Use of Proceeds
- -------------------------------------------------
None.
Item 3. Defaults Upon Senior Securities
- ---------------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
None.
Item 5. Other Information
- -------------------------
None.
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
25
<PAGE>
Pursuant to the requirements of Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
RADICA GAMES LIMITED
Date: September 8, 1998 /s/ David C.W. Howell
-------------------- ---------------------
David C.W. Howell
Executive Vice President
Chief Financial Officer
26
RADICA GAMES LIMITED
REPORTS RECORD THIRD QUARTER & NINE MONTH RESULTS
FOR IMMEDIATE RELEASE CONTACT: PATRICK S. FEELY
SEPTEMBER 8, 1998 PRESIDENT & COO
(LOS ANGELES, CALIFORNIA)
(626) 744 1150
DAVID C.W. HOWELL
EXECUTIVE VP & CFO
(HONG KONG)
(852) 2688 4201
(HONG KONG) Radica Games Limited (NASDAQ RADAF) reported today an after tax
profit of $11.18 million or $0.55 per share for the third quarter ended July 31,
1998 versus $7.15 million or $0.34 per share for the third quarter of 1997, a
56.4% increase in profits. After tax profit for the nine months ended July 31,
1998 was $29.24 million or $1.43 earnings per share versus $11.99 million or
$0.58 for the nine months ended July 31, 1997, representing a 143.9% increase in
profits.
Total revenues for the third quarter of fiscal 1998 were $34.83 million,
increasing 54.6% from $22.53 million for the same quarter last year. Total
revenues for the nine months ended July 31, 1998 were $93.05 million, increasing
96.4% from $47.38 million for the same period last year.
The third quarter increase in net sales was the result of continued strong sales
of 1997 product together with the impact of 1998 products such as Lunker
Bass(TM), Junior Bass Fishin'(TM), NASCAR Racer(TM) and Trail Burner(TM)
released in earlier quarters and third quarter shipments of our new VMS(TM) game
Stealth Assault(TM) which started shipping at the end of July, together with Pro
World Class Golf(TM), our upgraded golf game, Monte Carlo Enduro Racer(TM) and
Monte Carlo NASCAR Racer(TM). In addition, sales to the Hasbro Games Group have
grown by 47% from $4.5 million in the third quarter of fiscal 1997 to $6.6
million in the third quarter of fiscal 1998. New product shipped for the Hasbro
Group during the third quarter included Pro Drag Racer(TM) and Small
Soldiers(TM).
The gross profit for the third quarter of fiscal 1998 increased by $7.81 million
to $19.48 million from $11.67 million in the third quarter of 1997 and the gross
margin for the third quarter increased to 55.9% from 51.8% for the same quarter
last year.
The increase in gross margin was due to higher sales volume of current and new
product at historic margin levels relative to sales of low margin promotional
product and Original Design Manufacturing ("ODM") sales, as ODM decreased as a
percentage of sales from 20.4% to 19.6%.
Operating income for the third quarter of fiscal 1998 increased by $4.02 million
to $10.87 million compared to $6.85 million for the same quarter last year.
Operating expenses increased 78.6% to $8.61 million in the third quarter of
fiscal 1998 from $4.82 million in the same quarter of fiscal 1997, due to
increased sales related costs (particularly for national advertising), increased
research and development, offset by a $0.6 million provision against the
investment in U-Tel in the third quarter of 1997, an increase of $0.5 million as
a result of amortization of intangible assets with regards Girl Tech(TM) and
increased salaries due to certain management additions. As a percentage of
sales, operating expenses increased from 21.4% in the third quarter of fiscal
1997 to 24.7% in the third quarter of fiscal 1998. The
<PAGE>
operating margin rose to 31.2% during the third quarter compared to 30.4% during
the same quarter last year.
During the quarter the Company purchased an additional 56,647 shares in U-Tel
Inc. at a price of $17 per share. This maintained the Company's 35% holding in
U-Tel as U-Tel had issued new shares to several parties as part of a second
round of financing.
A total of 544,100 shares were repurchased during the quarter at an average
price of $16.79. In addition the company has repurchased 595,500 shares at an
average price of $15.09 since the end of the quarter.
The Company announced that the new factory building and dormitory extension were
completed in August giving a total of 464,000 square feet of factory and 340,000
square feet of dormitory as well as a further 3.7 acres of land for use in the
future. Currently 4,300 staff and workers are employed in China compared to
2,403 at the end of August 1997.
"As we move into our most important quarter of the year from a sales and
earnings perspective, it is gratifying to be able to announce our 5th straight
quarter of record earnings and to note that in the first nine months of fiscal
1998 we have sold more and made more profit per share than in the whole of
fiscal 1997, previously our best ever year. The sell through of both 1997 and
new 1998 product continues to be strong and we look forward to the results of
our pre-Christmas advertising campaigns in the fourth quarter," said Bob Davids,
Chief Executive Officer.
The foregoing discussion contains forward-looking statements that
involve risks and uncertainties that could cause actual results to
differ materially from projected results. Forward-looking statements
include statements about efforts to attract or prospects for
additional or increased business, new product introductions and other
statements of a non-historical nature. Actual results may differ from
projected results due to various Risk Factors, including Risks of
Manufacturing in China, Dependence on Product Appeal and New Product
Introductions, and Dependence on Major Customers, as set forth in the
Company's Annual Report on Form 20-F for the fiscal year ended October
31, 1997, as filed with the Securities and Exchange Commission. See
"Item 1. Description of Business -- Risk Factors" in such report on
Form 20-F.
Radica Games Limited (Radica) is a Bermuda company headquartered in Hong Kong
(NASDAQ - RADAF). Radica is a leading developer, manufacturer and distributor of
electronic handheld and table top games. Radica has subsidiaries in the U.S.A.,
Canada and the U.K., and a factory in Dongguan, Southern China. More information
about Radica can be found on the Internet at "www.radicagames.com" and about
Girl Tech at "www.girltech.com".
-- END --
<PAGE>
RADICA GAMES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(US Dollars in thousands, NINE MONTHS ENDED THREE MONTHS ENDED
except per share data) JULY 31, JULY 31,
----------------------------- ------------------------------
1998 1997* 1998 1997*
-------------- ------------- -------------- --------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Net sales $ 93,052 $ 47,375 $ 34,829 $ 22,532
Cost of sales (40,913) (24,806) (15,348) (10,861)
------------- ------------- -------------- --------------
Gross profit 52,139 22,569 19,481 11,671
------------- ------------- -------------- --------------
OPERATING EXPENSES:
Selling, general and administrative expenses (17,948) (8,335) (6,559) (3,404)
Research and development (2,419) (1,292) (1,050) (361)
Acquired research & development (1,500) - - -
Depreciation and amortization (2,412) (1,843) (998) (1,052)
------------- ------------- -------------- --------------
Total operating expenses (24,279) (11,470) (8,607) (4,817)
------------- ------------- -------------- --------------
OPERATING INCOME 27,860 11,099 10,874 6,854
OTHER INCOME 516 502 209 199
SHARE OF LOSS OF AFFILIATED COMPANY (168) (61) (76) (61)
NET INTEREST INCOME 1,527 531 577 248
------------- ------------- -------------- --------------
INCOME BEFORE INCOME TAXES 29,735 12,071 11,584 7,240
PROVISION FOR INCOME TAXES (496) (85) (400) (93)
------------- ------------- -------------- --------------
NET INCOME $ 29,239 $ 11,986 $ 11,184 $ 7,147
============= ============= ============== ==============
EARNINGS PER SHARE - BASIC:
Net earnings per share $ 1.43 $ 0.58 $ 0.55 $ 0.34
============= ============= ============== ==============
Average number of shares outstanding 20,518,553 20,732,615 20,463,416 20,786,091
============= ============= ============== ==============
EARNINGS PER SHARE - ASSUMING
DILUTION:
Net earnings per share and dilutive potential common $ 1.34 $ 0.56 $ 0.52 $ 0.33
stock ============= ============= ============== ==============
Average number of shares
and dilutive potential common stock outstanding 21,822,965 21,515,747 21,685,288 21,799,790
============= ============= ============== ==============
<FN>
* Restated to conform with 1998 presentation
</FN>
</TABLE>
<PAGE>
RADICA GAMES LIMITED
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
JULY 31, OCT. 31,
----------------- -----------------
(US Dollars in thousands, except share data) 1998 1997
----------------- -----------------
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 36,602 $ 33,504
Short-term investments - 2,050
Accounts receivable, net of allowances for doubtful
accounts of $900 in 1998 and $908 in 1997 and estimated
customer returns of $1,599 in 1998 and $2,327 in 1997 17,063 18,740
Inventories, net of provision of $1,314 in 1998 and
$3,479 in 1997 23,962 11,741
Prepaid expenses and other current assets 1,058 681
------------- ------------
TOTAL CURRENT ASSETS 78,685 66,716
------------- ------------
INVESTMENT IN AFFILIATED COMPANY 989 194
------------- ------------
PROPERTY, PLANT AND EQUIPMENT, NET 15,441 12,539
------------- ------------
INTANGIBLE ASSETS, NET 3,500 -
------------- ------------
TOTAL ASSETS $ 98,615 $ 79,449
============= ============
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable 13,655 10,370
Accrued payroll and employee benefits 2,407 1,249
Accrued expenses 8,746 5,945
Income taxes payable 182 213
Deferred income taxes 79 79
------------- -------------
TOTAL CURRENT LIABILITIES 25,069 17,856
----------------- -------------
SHAREHOLDERS' EQUITY:
Common stock
par value $0.01 each, 100,000,000 shares authorized,
20,039,194 shares outstanding (20,860,200 at Oct. 31, 1997) 200 209
Additional paid-in capital 17,658 28,589
Retained earnings 55,722 32,800
Cumulative translation adjustment (34) (5)
----------------- -----------------
TOTAL SHAREHOLDERS' EQUITY 73,546 61,593
----------------- -----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 98,615 $ 79,449
================= =================
</TABLE>
RADICA GAMES LIMITED
ANNOUNCES NEW SHARE REPURCHASE PLAN
FOR IMMEDIATE RELEASE CONTACT: PATRICK S. FEELY
JULY 8, 1998 PRESIDENT & COO
(LOS ANGELES, CALIFORNIA)
(626) 744 1150
DAVID C.W. HOWELL
EXECUTIVE V.P. & CFO
(HONG KONG)
(852) 2688 4201
(Hong Kong) Radica Games Limited (NASDAQ RADAF) announced today that the Board
of Directors of the Company has approved a new share repurchase plan to purchase
up to one million shares of the Company's common stock. The amount and timing of
purchases will be dependent upon market conditions.
Between June 17, 1998 and July 6, 1998, the Company repurchased 139,600 shares
at an average price of $16.80 completing the one million share repurchase plan
previously announced on December 22, 1997.
Radica Games Limited (Radica) is a Bermuda company headquartered in Hong Kong
(NASDAQ-RADAF). Radica is a leading developer, manufacturer and distributor of
electronic handheld and tabletop games. Radica has subsidiaries in the U.S.A.,
Canada and the U. K., and a factory in Dongguan, Southern China. More
information about Radica can be found on the Internet at www.radicagames.com.
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RADICA GAMES LIMITED
ANNOUNCES NEW DIRECTOR
FOR IMMEDIATE RELEASE CONTACT: PATRICK S. FEELY
JUNE 18TH, 1998 PRESIDENT & COO
(LOS ANGELES, CALIFORNIA)
(626) 744 1150
DAVID C.W. HOWELL
EXECUTIVE V.P. & CFO
(HONG KONG)
(852) 2688 4201
(Hong Kong) Radica Games Limited (NASDAQ RADAF) announced today the appointment
of Mr. Peter Thigpen as a member of the Board of Directors. Mr. Thigpen owns
Executive Reserves, a consulting company that specializes in quality processes,
ethics and marketing strategy. Prior to starting Executive Reserves Mr. Thigpen
was Senior Vice President - U.S. Operations and a member of the Executive
Management Committee at Levi Strauss & Company, retiring after 23 years with the
San Francisco based apparel company. Mr. Thigpen's career at Levi Strauss
spanned a wide range of geographical and functional positions. He started with
the company's international division, spending thirteen years located overseas.
During his tenure at Levi Strauss Mr. Thigpen held positions of President of
European Operations, President - Levi Strauss USA, President - The Jeans Company
and a member of the Board of Directors.
Mr. Thigpen is a Senior Fellow and a Moderator at the Aspen Institute, member of
the Board of the San Francisco School Volunteers, member of the Board of
Governors of the Josephson Institute of Ethics, a lecturer on ethics at the Haas
Graduate School of Business at the University of California, Berkeley, Member of
the Board of Directors of Designs, Inc. and the Gymboree Corporation.
"Peter Thigpen brings to Radica tremendous experience in a field that is heavily
dependent upon current fashion and trends similar to the toy industry. Pete's
international experience in marketing and sales coupled with his solid grounding
in corporate and business ethics compliments nicely the experience level of our
Board. We are very fortunate to have the opportunity to work with a man of
Pete's talents", said Bob Davids, CEO of Radica Games Limited.
Radica Games Limited (Radica) is a Bermuda company headquartered in Hong Kong
(NASDAQ-RADAF). Radica is a leading developer, manufacturer and distributor of
electronic handheld and tabletop games. Radica has subsidiaries in the U.S.A.,
Canada and the U. K., and a factory in Dongguan, Southern China. More
information about Radica can be found on the Internet at www.radicagames.com.
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